China, the world’s biggest pork consumer, will import 45 percent more of the meat this year after one of the largest reductions of its hog and sow herds for several decades, according to Rabobank International.
The country has culled almost 100 million hogs and 10 million sows -- equal to the herds in Mexico, U.S. and Canada combined -- over the past 18 months, Rabobank analysts Will Sawyer, Chenjun Pan and Albert Vernooij said in a report Tuesday. Millions of small Chinese producers have exited the industry after over-expansion between 2011 and 2013 reduced profits, leaving behind the more modern, efficient businesses, according to Rabobank.
The smaller herd will lead to domestic pork production dropping 6.5 percent to 53 million metric tons this year, the analysts said. Consumption will decline 5.3 percent to 55 million tons, with a record 1.9 million tons of imports filling the shortfall, Rabobank estimates.
Imports will be around the same level in 2016 because the recovery of the herd isn’t expected to be quick. Meanwhile, supply is rebounding in other countries.
“The surge in pork trade could not come at a better time as the global pork sector is in the midst of a supply glut,” the analysts said. “Even small changes in China’s pork industry have a notable impact on the global market.”
Pork in China is 60 percent to 100 percent more expensive than in the U.S., Canada or European Union, according to Rabobank. The EU is the best-positioned to gain from Chinese demand, while the availability of supply that’s free of ractopamine, a growth-promoting drug banned by China, will be the determining factor in the U.S., Rabobank said.
The U.S. exports only as much as 20 percent of its pork that’s ractopamine-free, with much of that supply coming from Chinese-owned Smithfield Foods Inc., according to the report.
A limiting factor for the pork U.S. industry is that about 15 plants, representing as much as half of the country’s processing capacity, are banned from exporting to China, Rabobank said. Several became ineligible last year after traces of ractopamine were discovered.
While China’s own pork supply will expand in the second half of 2016, its imports will keep climbing and the country will play an “ever increasing” role in absorbing global supply, particularly frozen products, according to Rabobank.